Meta Materials (NASDAQ:MMAT) stock is in a state of transition – or more accurately, the company is in a state of divestiture. Soon, it will spin off an oil and natural gas business that could have been a significant revenue generator for Meta Materials.
Besides, the company is having major financial issues. So, investors shouldn’t let the spin-off news distract them from Meta Materials’ foundational problems.
Sure, spin-off news can be exciting sometimes. It could provide an opportunity to invest in a small but growing company. However, like television series spin-offs, company spin-offs aren’t always successful.
Besides, there are fundamental issues that Meta Materials’ investors need to pay attention to. After the spin-off, Meta Materials might be a slimmer company, but not necessarily a better one.
What’s Happening with MMAT Stock?
It’s understandable if Meta Materials’ investors are hungry for news, any news. Surely, they’re looking for a catalyst to spark a turnaround as they’ve lost a lot of ground in 2022.
Bear in mind that MMAT stock started the year at around $2.83, so the shareholders are still in the red. As for the unfortunate shareholders who bought above $10 last year, they’re definitely underwater now.
So, what’s the scoop with Meta Materials lately? In a press release, the company announced its plans to spin off Next Bridge Hydrocarbons. This divestiture has already been approved by Meta Materials’ board of directors, so it’s practically a done deal.
If you’re thinking about getting in on the ground floor of Next Bridge Hydrocarbons, you’ll probably be out of luck. As it turns out, Next Bridge common stock will not be a publicly traded asset.
Meta Materials Has a Widening Earnings Loss
Meta Materials’ management might end up regretting spinning off Next Bridge Hydrocarbons. The company has interests in multiple U.S. oil and natural gas properties which could prove to be quite valuable if energy prices increase.
However, it looks like Meta Materials’ management doesn’t want to take full advantage of the potential upside in Next Bridge Hydrocarbons. Meanwhile, they have to worry about Meta Materials’ financial situation, which isn’t stellar.
Sure, Meta Materials can claim revenue growth during 2022’s third quarter. Yet, as they say, the bottom line is the bottom line. Revenue expansion doesn’t mean much if a company is bleeding money.
For Meta Materials, the bleeding is only getting worse, it seems. The company’s $24.48 million Q3 2022 net earnings loss is more than double the figure reported in the year-earlier quarter. Moreover, Meta Materials’ cash and cash equivalents balance dwindled from $46.65 million in 2021’s third quarter to $30.61 million in the third quarter of 2022.
What You Can Do Now
A press release touting a spin-off can get investors enthused for a little while. However, let’s not get distracted as Meta Materials is facing a widening financial hole.
You probably won’t be able to trade shares of Next Bridge Hydrocarbons on the stock market, but that’s not even the main issue here. The focus should be on Meta Materials’ fiscal issues – and spin-off or no spin-off, cautious investors would be wise to avoid MMAT stock.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.